Prime Infrastructure (PIH)

UBS has upgraded its recommendation on Prime Infrastructure Holdings, the diversified infrastructure investment vehicle formed after the recapitalisation of Babcock & Brown Infrastructure. UBS changed its rating from “neutral" to “buy". The broker’s price target remains $3.90, which is its 12-month discounted cash flow valuation, less a 10 per cent qualitative factor model discount. UBS says the recent weakness in Prime’s share price presents a buying opportunity, but warns some investors may wish to remain cautious until there is further clarity on Natural Gas Pipeline’s rate case and Prime’s register (largely hedge funds). According to UBS estimates, Prime is now trading on a financial year 2011 earnings multiple of about 8.2 times, which is about 7 per cent below global peers on 8.8 per cent.

Prime Infrastructure’s $1.8 billion recapitalisation last year saved the company from collapse, but in the process wiped out many investors with the sale of trillions of new shares.